Aviva PLC (AV.LN), the U.K.'s biggest insurer by market capitalization, Wednesday posted an 11% rise in life and pensions new business sales for 2008, as sales in North America, Asia and some parts of Europe made up for a lackluster growth in the U.K.

It also said its capital position remains strong, with surplus capital at GBP2 billion, up from GBP1.9 billion at end-September.

The company said that total new business sales last year were GBP36.3 billion on a Market Consistent Embedded Value (MCEV) basis. This is up from a restated 2007 sales figure of GBP32.7 billion.

But under the previously used European Embedded Value (EEV) method, 2008 sales would have been GBP34.58 billion, up 9% from GBP31.6 billion in 2007.

Under EEV, a life insurer's profitability is partly measured by its own estimated rate of investment return on its bond and stock portfolio.

A key change under MCEV is that insurers take investment risks into account and use a more "market consistent" and standard rate of return.

The result under the EEV method was higher than the GBP33.52 billion average forecast from 17 analysts.

"Our priorities are to maintain our financial strength and continue to transform Aviva for the benefit of customers and shareholders," he said.

Aviva shares have fallen by about 46% in the last year, giving it a market capitalization of GBP8.8 billion. Its rival, Prudential PLC (PR.LN), has a market value of GBP8.03 billion. Analysts said the results were better than expected and that Aviva's capital position remains strong.

Panmure Gordon analyst Barrie Cornes said Aviva put up "a good performance without any nasty surprises. But the (market) uncertainty driving the shares price - rather than fundamentals - remains."

Cornes said Aviva's low share price "reflects concerns over its asset exposure to equities, corporate bonds and commercial property loans rather than any rational link to its stated embedded value." Cornes kept his hold rating and target price of 330 pence.

Oriel Securities said the 43% fall in investment sales to GBP4 billion "is not a surprise as it follows trends seen across the sector and through 2008," noting that life and pensions sales were particularly strong in Eastern Europe.

Oriel kept its buy rating on the stock.

Sales in the U.K. last year grew 1% to GBP11.86 billion, underperforming North America which grew 57% to GBP5.71 billion, Europe which grew 8% to GBP17 billion and Asia Pacific which grew 8% to GBP1.72 billion.

CEO Moss said the company is reviewing its offer to give policyholders some cash following a fall in the value of its so-called "inherited estate."

An inherited estate is a cash surplus that has built up in with-profits funds over many years.

In July, the company said it planned to reattribute GBP1 billion in surplus cash from two with-profits funds, with the intention of offering a cash payment averaging GBP1,000 to one million policyholders.

Moss said the recent fall in value "means that the original reattribution offer for the inherited estate no longer meets our critical test of being fair for both policyholder and shareholders." He said the company will give an update on its inherited estate in the next few months.

Policyholder advocate Clare Spottiswoode said Aviva "has opened discussions with us about how to keep the prospect of a reattribution offer alive."

"We are considering how we might be able to restructure the offer to move in line with the size of the estate at a point close to the time payments could be made. I am confident that we will succeed," Spottiswoode said.